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Another rate cut, but no silver bullet

The European Central Bank will respond to the growing evidence that the euro-zone economy is heading back into recession by cutting interest rates to 1% at its December 8th meeting. What’s more, President Draghi is likely to announce the provision of longer-term loans to commercial banks at maturities of two or three years in an attempt to address strains in the sector. Crucially, however, the ECB will continue to resist calls for it to fire a silver bullet into the heart of the debt crisis by printing money to buy up huge quantities of highly indebted governments’ bonds.

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